Three Scenarios When a Private Money is the Best Option
There are situations when private money financing may be a better choice than obtaining conventional financing. Here are three scenarios when private money may be to your advantage:
- You need cash — Investors looking to buy foreclosed or distressed properties will be in a much stronger bargaining position if they are able to make a cash offer. The buyer can also be in a strong bidding position if they show the ability to make a larger down payment than their competitors. In either case, having cash available quickly is a cornerstone of working with private investors, because you can receive the cash you need in days versus weeks for conventional loans. This assumes a conventional loan is even available, which could be unlikely for less desirable properties.
- You need to finance quickly — As stated above, private money is available quickly. If you find an ideal real estate deal, you need to move quickly to avoid losing it to another buyer. Private money investors use equity to qualify a loan and can ignore other issues a buyer may have which would stop a conventional loan. The private money investor will ask for a higher interest rate because they are accepting a higher risk, but obtaining money quickly can allow real estate buyers to move more properties with greater profits which will offset the higher interest rates.
- Your credit rating is an issue — A poor or non-existent credit rating will stymie any conventional loan. Banks and lending institutions use your credit rating as a primary qualifier for financing. A related issue is being self-employed or having inconsistent income. Private money investors are securing their loans with equity in the property and can qualify you much faster than any conventional lender.
Real estate investors need quick access to cash to successfully compete in the commercial real estate market. AHL Hard Money Network is ready to help our customers obtain the cash they need to be successful in the real estate market. Contact us today for more information about private money financing.